Three Billionaires Join Buffett for Heinz Deal

Feb. 14 (Bloomberg) -- As Warren Buffett puts as much as
$13 billion into the purchase of HJ Heinz Co., the world’s
fourth-richest man is relying on three other billionaires to
make the deal work.

3G Capital, an investment firm backed by three Brazilian
entrepreneurs including the country’s richest man, Jorge Paulo
Lemann, will take an equity stake of more than $4 billion,
according to people familiar with the deal. Lemann, 73, and his
partners Marcel Telles and Carlos Alberto Sicupira previously
led the $52 billion merger between Anheuser-Busch Cos. and InBev
NV in 2008, and in 2010 orchestrated the $3.3 billion leveraged
buyout of Burger King Holdings Inc.

“Buffett has said these guys are the best operators in the
world. I agree,” hedge-fund manager William Ackman, whose
Pershing Square Capital Management LP owns 11 percent of Burger
King after the fast-food chain merged with a company that Ackman
co-founded to gain a public listing, said about 3G yesterday.
“These guys are long-term holders. They’re not your traditional
private equity. They’re spending their own money.”

Lemann, who brought the $23 billion Heinz deal to Buffett,
and his partners will oversee the operations of the company.
Buffett, 82, who knows Lemann well and previously sat with him
on the board of razor-maker Gillette Co., has said before that
he favors deals where partners run joint investments.

Berkshire and 3G will pay $72.50 a share for Heinz, a
premium to yesterday’s closing price of $60.48. The deal has
debt financing from JPMorgan Chase & Co. and Wells Fargo & Co.,
according to a statement today, and the company’s existing debt
will be rolled over, valuing the transaction at $28 billion.

‘Their Baby’

“They’re our partner but it’s their baby from an
operational standpoint,” Buffett said today in an interview on
CNBC. “Any partnership where I don’t have to do the work is my
kind of partnership.”

The trio’s wealth has gained from their previous deals.
Anheuser Busch InBev NV has gained 136 percent since the
transaction was announced in July 2008, reaching a five-year
high of 69.94 euros in September. Burger King Worldwide Inc. has
increased 12 percent since 3G returned it to the New York Stock
Exchange in June, trading at a high of $18.13 last month.

Lemann is worth an estimated $19.1 billion, according to
the Bloomberg Billionaires Index. Telles, 62, has built a
fortune estimated at $8.7 billion, and Sicupira is worth $7.3
billion.

They have known Lemann since the early 1970s, and together
they started 3G in 2004, building on the family office they
shared to invest their fortunes.

Goldman Model

In 1971, Lemann bought a Rio-based brokerage called
Garantia. Using the Goldman Sachs Group Inc. partnership model
as his inspiration, he turned it into Brazil’s premier
investment bank. Sicupira and Telles joined him there.

The partners made one of their longest-standing investments
in 1982, with the takeover of Lojas Americanas SA, a discount-retail chain that is now among the largest in Brazil. They
acquired Cia. Cervejaria Brahma seven years later, in their
first foray into the beer industry.

In 1998, after more than $100 million in trading losses on
restructured government debt, Garantia was sold to Credit Suisse
Group AG, netting the partners $675 million in cash and stock.
The “three musketeers,” as they are sometimes called, then
turned their focus to acquisitions.

They combined a series of Latin American brewers into
Brahma, which became Cia. de Bebidas das Americas, known as
AmBev, in 1999. Today, that company, a unit of AB InBev, is
Brazil’s biggest by market value, having surpassed state-controlled oil producer Petroleo Brasileiro SA last year.

Batista Backing

Through buyout firm GP Investimentos, which they started in
1993, they also bought, turned around and sold companies such as
railroad operator ALL America Latina Logistica SA. The trio
engineered AmBev’s $11 billion merger with Belgium’s Interbrew
NV in 2004, the same year they sold GP to junior partners at the
firm. They followed that up in 2008 with the $52 billion union
with Anheuser-Busch Cos.

In 2010 came Burger King. The trio put up $1.5 billion
cash, funded in part by commodities tycoon Eike Batista,
according to an official at the Batista’s EBX Group Co. holding
company. Last year, they sold a 29 percent stake of the fast-food chain for $1.4 billion to William Ackman’s Pershing Square
Capital Management LP.

Lemann and his partners are known for their tough
management style, as demonstrated at Burger King, which they
bought for $24 a share from Texas-based private-equity firm TPG
Capital and other investors and took private in October 2010.

Chasing McDonald’s

At the time it was acquired, the company was a distant
third in revenues and profits behind competitors McDonald’s
Corp. and Wendy’s Co. Bernardo Hees, a former chief operating
officer of All America Latina Logistica SA, a firm Lemann and
his partners once controlled, was named chief executive officer
and quickly cut costs, including hundreds of jobs.

“I don’t think I’ve ever seen a better developed
management group than the one that Jorge Paulo Lemann has
developed over the years in Brazil,” Buffett said today. “He
is an incredible guy.”

The son of a Swiss businessman, Lemann was born in Rio de
Janeiro in 1939. He graduated from Harvard University in 1961
with an economics degree and briefly was a financial columnist
at the Rio newspaper Jornal do Brasil before moving on to work
in the brokerage business.

He also pursued a professional tennis career. He was a
five-time Brazilian national champion and played in the Davis
Cup twice, once representing his home country and once
Switzerland, where he maintains dual citizenship.

‘Good Friends’

He now lives in a suburb of Zurich with his family after
three of his children were almost kidnapped in Sao Paulo in
1999. Lemann makes few public appearances except for charity
events.

“Jorge Paulo and I are very good friends and neither he
nor I like to think of this as our last deal,” Buffett said
today. “We will be buying things.”